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The effects of feed and energy costs on broiler farm decisions: A dynamic programming approach

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  • Samantha L. Padilla
  • Lenis Saweda O. Liverpool‐Tasie
  • Robert J. Myers

Abstract

We explore the decision‐making process of commercial poultry enterprises facing rising input costs in Nigeria. Using a cross‐sectional dataset and a 1‐year weekly panel of farm inputs and prices, we employ a discrete time, discrete control and state space dynamic programming (DP) model, disaggregated by farm size, to determine optimal decisions. In the presence of high feed costs and increased energy use, the optimal strategy for medium‐sized farms is to sell and exit the industry. However, it remains profitable for large firms to stay in the sector. The findings indicate that broiler farms need larger batch sizes to withstand input price increases and rising energy costs. While Nigeria has seen a rapid growth of commercial livestock enterprises, the sensitivity of the poultry industry to changes in feed prices is a major threat to the sector and highlights the importance of acquiring higher batch sizes and employing other risk management tools, such as contracts to forward price input.

Suggested Citation

  • Samantha L. Padilla & Lenis Saweda O. Liverpool‐Tasie & Robert J. Myers, 2021. "The effects of feed and energy costs on broiler farm decisions: A dynamic programming approach," Agricultural Economics, International Association of Agricultural Economists, vol. 52(2), pages 249-264, March.
    • Handle: RePEc:bla:agecon:v:52:y:2021:i:2:p:249-264
    DOI: 10.1111/agec.12617
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    References listed on IDEAS

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    Cited by:

    1. Muhammad Imran Chaudhry & Mario J. Miranda, 2024. "Endogenous price fluctuations: Evidence from the chicken supply chain in Pakistan," American Journal of Agricultural Economics, John Wiley & Sons, vol. 106(2), pages 637-658, March.

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